The Australian manufacturing sector contracted for a tenth consecutive month in December, with the strong Australian dollar maintaining its stranglehold on import-exposed parts of the economy.

The Australian Industry Group’s Australian Performance of Manufacturing Index (PMI) reached 44.3 points in December, with a level below 50 indicating contraction. That is unchanged from November’s reading.

The manufacturing production and new orders measures were also in negative territory, and none of the manufacturing sub-sectors reported growth in December.

“Survey respondents remained cautious about the outlook. They cited a range of inhibitors including soft demand, higher energy charges, stronger import competition and the strong Australian dollar," the report said.

Cost pressures have compounded the weak sales environment for Australian manufacturers, stemming from weak measures of productivity. The survey’s input cost sub-index slowed slightly but remains high at 60.6 points, while “relatively strong wages growth" was reported in December.

“A high Australian dollar and higher costs, particularly for energy due to the impacts of the carbon tax and, in some states, the costs associated with investment in network infrastructure, have all taken their toll on margins and activity," AIG chief executive Innes Willox said.

“The pressures are widespread across the industry and in December no manufacturing sub-sector recorded an expansion in activity."